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The judge overseeing the U.S. government’s case to block Oracle Corp.’s hostile bid for PeopleSoft Inc. quizzed both sides during closing arguments this week, emphasizing market definition and customer testimony.

U.S. Department of Justice (DOJ) lawyer Claude Scott in his closing arguments repeated the government’s argument that the acquisition of PeopleSoft would stifle competition in the market that DOJ defines as high-end human resources and financial management applications for large and complex enterprises, resulting in higher prices and less spending on product development.

Oracle attorney Dan Wall countered that Oracle needs to acquire PeopleSoft to achieve scale in a cutthroat market with many players, including giant SAP AG and, increasingly, Microsoft Corp. Oracle said it competes for customers with smaller players such as Lawson Software Inc. and American Management Systems Inc.

After four weeks of testimony that ended July 1, both sides took full advantage of their last chance to sway U.S. District Court Judge Vaughn Walker, who is expected to decide the matter within two months. Walker peppered the attorneys with questions and homed in on the core issues; the DOJ’s narrow definition of the market and whether a merger would be anticompetitive.

Walker expressed his doubts about the market definition, but appeared sympathetic to users such as DaimlerChrysler AG and Nextel Communications Inc. who criticized the merger in sworn testimony during the four-week trial. In total, 15 customers testified for the DOJ.

“I agree that the government’s (market) definition is awkward and unwieldy,” Walker said during Oracle’s closing arguments. “But how do I deal with the compelling testimony of customers who took the stand?”

Walker also appeared to value testimony from Kenneth Elzinga, an economist and antitrust expert from the University of Virginia, who reviewed hundreds of Oracle sales memos and found that competition with PeopleSoft provided a major incentive for Oracle to drop prices. Elzinga testified for the DOJ.

“Elzinga showed that Oracle and PeopleSoft are the most frequent head-to-head competitors,” Walker said to Oracle attorney Wall. “So you’re taking the two biggest competitors out of the market and you’re merging them.”

Wall responded by saying Elzinga’s research is flawed and that the DOJ needs to prove that Oracle’s takeover of PeopleSoft would have a significant effect on the business applications market as a whole, not just a small piece wrongly defined by the DOJ.

The closing arguments drew a crowd to Judge Walker’s San Francisco courtroom that was even larger than when Oracle chief executive officer Larry Ellison testified. Among the onlookers, for the first time during the trial, was PeopleSoft president and CEO Craig Conway.

After the trial closed, Conway briefly spoke to reporters in the hallway outside the courtroom. “The case has been, from the beginning, about harm to customers and the industry. I think the DOJ presented that well,” he said. “We’re anxious for a speedy decision.”

Conway declined to answer questions about what his company would do if Oracle were to prevail and if he has a contingency plan or possibly another suitor interested in acquiring the company.

DOJ antitrust chief R. Hewitt Pate also attended and was upbeat after closing arguments ended. “The evidence points to that this merger is bad,” Pate said.

The closing arguments on Tuesday marked the end of a closely watched trial that gave rare insight into the enterprise software industry. The ruling could end Oracle’s pursuit of PeopleSoft, but insiders expect the losing side to lodge an appeal.

Oracle also faces additional challenges, including convincing PeopleSoft shareholders to vote in favor of the merger, something only a small percentage has done so far. The Redwood Shores, Calif., company has also had to sue PeopleSoft in a Delaware court to overturn a “poison pill” measure protecting against a hostile takeover.

Additionally, the European Commission is investigating the merger and has asked for more information from Oracle following a hearing that took place in March. Regulators in Europe have expressed similar concerns about the deal to their counterparts in the U.S.

Oracle launched its hostile bid, currently valued at US$7.7 billion, for PeopleSoft in June last year, days after PeopleSoft announced its plan to acquire J.D. Edwards & Co. The DOJ in February sued to block Oracle’s merger plan.